Over the past few years, I’ve transitioned my practice from the billable hour to flat fees. For me, the flat fee works because most of the matters that I handle are, if not entirely predictable, then easily divided into discrete segments, each of which can each be assigned a set price. Though I can’t tell you exactly how I price each matter, my firm turns a profit and I’ve never had a client complain – so I assume that I’m doing something right.
Still, I’d like to be able to provide newer lawyers with better guidance on setting flat fees than simply saying “I just know how much it should cost.” Moreover, even with my generally positive experience with flat fees, there are still some quirks that befuddle me, which I have yet to see flat fee aficionados address. And so here are some of my open questions about flat fees – both to those who love them and to ethics gurus who can offer guidance on them. Feel free to address these hypothetical questions in the comment section, or in a separate post at your blog; I’m happy to link to it.
HYPO #1: I practice in a jurisdiction that does not allow me to treat flat fees as earned on receipt. Instead, I am required to deposit a flat fee paid in advance into my trust account, and disburse the proceeds as they are earned. I handle [criminal law/family law/fill-in-the-blank cases] and I want to charge a flat fee for the entire matter, whether it goes to trial or not. What kind of language can I include in my retainer agreement that will allow me to keep the full fee if the case does not go to trial (and arguably, at least some of the fee is “unearned”)? [I have some thoughts here, but I'd like to hear from you experts]
HYPO #2: I handle cases under fee-shifting statutes, which means that if I win, I can recover my clients’ attorneys’ fees. To document my fee request, the court requires me to submit detailed, hourly time sheets – but I charge flat fees for these matters. What do I do to recover attorneys’ fees?
HYPO #3: I represent municipalities, state agencies or insurers which require hourly billing. Any thoughts on how I might make the case for flat fees for these types of clients?
HYPO #4: I charge flat fees to my clients, but I don’t have any associates. So if I get busy, I outsource to contract lawyers – who typically charge by the hour – and may run over budget or not complete the work that I need within the number of hours I’ve requested. How can I align fixed flat fees that I charge clients with contract lawyers’ hourly billing practices?
HYPO #5: A client filed a grievance against me, and is claiming that my $15,000 flat fee to defend a small business owner against a lawsuit by a former employee was unreasonable when I managed to resolve the case with a letter and a couple of phone calls. How do I defend myself before the disciplinary committee? Should I voluntarily offer a partial refund?
Just to make things interesting, I’ll give a shout out in my blog and send a small gift for the best responses (either posted in the comments below or at your own post).